The RBA said rising house prices were adding to household wealth at a time when wages were growing slowly, encouraging people to spend more money. "Members noted that the strength in the housing market was expected to give some support to household consumption in the near term as rising housing valuations allowed some credit-constrained home owners to bring forward their consumption," the RBA said. "The pickup in retail sales in the September quarter and stronger growth in retail sales in those states with more rapid housing price growth was consistent with this view." Advertisement The RBA said growth in mortgages to property investors had continued "at a noticeably faster rate" than credit to owner-occupiers, with no signs that dwelling investment growth would slow in coming quarters. It said low interest rates and ongoing population growth would continue to support growth in housing activity and the established housing market. "This was expected to spur activity in other areas of the economy through the usual channels," the RBA said. In order to continue stimulating demand, the RBA decided to leave the cash rate at the record low of 2.5 per cent on November 4. The board also repeated its view that the Australian dollar is overvalued. Despite significant falls in commodity prices since January - a key driver of the exchange rate over the long term - the Australian dollar was higher at the end of October against the currencies of Australia's trading partners, the RBA noted. "Despite the recent appreciation of the exchange rate, the Australian dollar remained above most estimates of its fundamental value, particularly given the further declines in key commodity prices over the course of the year to date," the RBA said. "As a result, the exchange rate was offering less assistance than would normally be expected in achieving balanced growth in the economy." This was cited in the minutes as one of the considerations for the RBA's decision to keep interest rates on hold, as widely expected. "Members considered that the most prudent course was likely to be a period of stability in interest rates," the RBA said. AAP
"Members noted that the strength in the housing market was expected to give some support to household consumption in the near term as rising housing valuations allowed some credit-constrained home owners to bring forward their consumption," the RBA said. So people who have already borrowed to their limits can now borrow more thereby returning to an over indebted state but that is fine cause that money, which otherwise would only (potentially) get spent in the future, gets spent in the economy today?? Seems legit.
Wait, we need to sell derivatives of the high risk new loans and take out insurance against the risk. We could make millions selling derivatives to super funds....
